Intel: Foundry Business Will Not Have Substantial Revenue Impact for Two to Three Years.

The outgoing chief executive and president of Intel Corp., Paul Otellini, is confident that the foundry business will be gaining its role within the chipmakers’ revenue stream. However, Mr. Otellini claims that as the company is in process of gaining customers, the Custom Foundry division will not have a substantial revenue impact on the whole chip giant.

“I’ve described the strategy before as a crawl, walk, run strategy. We are past crawling. We are in the mode of collecting serious customers. The design win activity leads the announcement activity, as you would expect in this business, and there are some other customers that we still have not yet publicly announced. In terms of the business […] it will not have a significant revenue impact to the company for two to three years. That’s the design cycle for these products,” said Paul Otellini, chief executive of Intel, during a quarterly Q&A with financial analysts.

Recently Intel signed a contract to make chips for Altera. In addition, it is rumoured that Intel has also landed orders from Cisco. Both are very large fabless semiconductor companies and their orders will grow significant in the coming years as the companies ramp up their designs at Intel’s fabs..

“In the case of someone like Altera, the products tend to run for quite some time. So think of that as something that will start two-plus years from now and run for quite a number of years thereafter on several generations of technology,” said Mr. Otellini.

Earlier this year rumours transpired that Intel was in talks to make custom chips for Apple on a contract basis. However, given that Apple needs extreme volumes of processors it designs, it is unlikely that Intel will have enough capacities to serve both Apple and itself until 450mm fabs are built and go online.

Intel established its Intel Custom Foundry division within its technology and manufacturing group about three years ago, but it remains extremely tight-lipped about its ongoing endeavors, future plans, prospects and clients. Being the largest maker of semiconductors in the world, Intel has leading-edge process technologies and invests more than anyone else in research and development (R&D) of new manufacturing processes as well as building new manufacturing facilities. Since it every new technology node costs more than the previous one and the cost of new fabs is growing as well (and with 450mm factories their cost will get even higher), Intel needs to constantly sell more chips and ensure full utilization of its factories. One of the ways to guarantee maximum utilization of production facilities is to make chips for others.

“The business model that we have for the foundry assumes value based pricing. The people that we are soliciting and people that are attracted to us are those who see the advantages of our technology as it manifests itself in their products and gives them an advantage in the marketplace. So it’s a healthy business for us,” concluded Mr. Otellini in his last conference call as the head of Intel.